Private hospitals profit from treatment, public patients miss out

A cutting-edge electromagnetic treatment for depression has turned into a money-spinner for private hospitals thanks to a strange health insurance quirk.

Meanwhile, public patients miss out because it is not covered by Medicare.

The therapy in question, 'transcranial magnetic stimulation', uses powerful magnets on the skull to treat cases of depression that have proven resistant to antidepressants and other therapies.

In a bizarre scenario, the only way private health insurers will cover TMS in private hospitals is if they admit patients to a room and bill the insurers for the cost of the stay – not the treatment.

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The situation means health insurers pay private hospitals way too much for a cheap treatment – contributing to their sky-rocketing premiums – while patients end up with sub-optimal outcomes.

“A significant portion of patients, but not all, would be better off being treated on an outpatient basis – they don’t necessarily require admission to hospital,” says Professor Paul Fitzgerald, who delivers TMS at the Epworth Clinic in Camberwell.

“The reality is it is costing the health system more money than would otherwise be rational. But on the other hand, the hospitals are providing patients access to what is frequently a life-changing treatment they would not have access to otherwise.”

Health insurers could cover the cost of TMS done outside the hospital. But Medibank Private, one of this country's largest health insurers, chose not to fund TMS in this way because it expected the government to put it on Medicare, the company told The Age.

If a therapy is covered by Medicare, private insurers are legally prevented from covering it out-of-hospital.

But Medicare funding seems a long way away.

Almost 100 studies and reviews have been done on TMS, most finding it safe and effective, according to an editorial published in the Medical Journal of Australia in June.

The Medical Services Advisory Committee, which considers whether new services should get government funding, has looked at TMS twice – in 2007 and 2014. Both times it found there was not enough evidence the therapy was more effective than other treatments, nor that it was good value to the taxpayer.

Part of the problem is no private company is willing to sponsor the detailed trials of the therapy needed to win funding from Medicare, says Professor Fitzgerald. In part that is because the therapy is so cheap to deliver there is not enough profit available to make a big investment worthwhile, he says.

A session of TMS lasts for about 30 minutes and costs about $200 to administer. An overnight stay in a hospital bed costs at least twice as much – which really adds up when patients need 20 to 30 sessions.

Given the therapy is safe, quick, and has no side-effects, there is no reason for a person to stay at hospital for the rest of the day – or, indeed, for the next six weeks, says University of NSW Professor Colleen Loo, a world leading expert in TMS therapy based at the Black Dog Institute.

“The whole funding model does not make sense,” she says. “You don’t need to be an inpatient to get TMS.”

Meanwhile public patients are missing out.

Professor Loo introduced the therapy to Australia, and is considered a world-leading expert. Yet she finds more than half the patients who approach her for the therapy are turned away when they learn it is not covered by Medicare.

“We tell patients if you come to us, you’ll need to pay. Or you can go to a hospital where you don’t need to pay.”

Medibank Private has been looking for its own way to change how TMS is delivered. The insurer is running a large trial of outpatient TMS, which can be administered at a far lower cost, to compare its effectiveness to in-hospital TMS.

“Certainly an overnight admission would be a higher cost than the cost we pay for TMS – significantly higher,” said Dr Linda Swan, the company’s chief medical officer.

Dr Swan was careful not to blame private hospitals for the situation, which she said was created by Australia’s obtuse health funding laws.

“I’m sure the people who run private hospitals are very good at ensuring they are not making a loss.”

Transcranial Magnetic Stimulation is thought to work by encouraging the brain to grow new paths between neurons.

In some types of depression, the brain seems to get trapped in a negative pattern of thoughts, like the needle of a record-player that gets caught in a groove. “The brain is stuck. These things help to reset the brain, regrow the neurons, and allow people to move on,” says Professor Loo.